Project financingin the case of residential construction in Belgrade

Abstract

Project financing is a method of funding in which the creditor primarily takes into account revenues generated by individual project, as the source of repayment and security for the risk exposure. Risk assessment is a critical phase for investor and creditor in project financing as it bears responsibility for the assessment of project's ability to repay debts (loans), cover costs as well as for the payment of dividends to shareholders. Designed and expected cash flow generated by the project is strongly influenced by risk. If the risks are not adequately assessed and anticipated, there should be a decrease in cash flow or the deficit. If cash flow is not sufficient for servicing commitments toward lenders, the project is unsuccessful and needs to end. On the basis of the analysis of principles and product offers of the project financing banks which are operating in the Republic of Serbia (Banca Intesa, Erste Bank, Sberbank and UniCredit Bank) it is practically shown which are the principles of the project financing of residential branches in Zarkovo (part of Belgrade) and what are the advantages for the investor (concerning assets, cash flow projections in the function of repayment of loans, the basis for the approval of project financing - future revenues generated by the project, the legal status of borrowers and risk distribution).